Early Redemption Charge ERC

holly_hobby

The crux is you, like I, and everyone else, accepts the ERCs as part n part of the product we select .... if you don't like the ERCs, choose another product that either doesn't have them or are lower (given a shorter term or higher payrate).

I don't mean to be churlish, but you, we, us, pays our money and takes our punt .... if we later decide it wasn't such a good choice, thats life !

Hope this helps

Holly

dunstonh

Maybe they settled because they were afraid to lose and have all the money to shut us up.

More likely it was cheaper to settle than argue the case. A commercial decision would have been made. The FSA has no problem with ERCs and they exist for valid commercial reason and they were are in the contract you agreed.

Or it could be an old case. Some lenders did not put the ERC in the signed contract (typically 80s to early 2000s). The FOS had some of these and ruled in favour of the borrower as it was not in the contract agreed. However, the FOS ruled against people where it was in the contract. The FOS generally applies law and fairness.

I just wish there is a robin hood out there for us little folks and not let the greedy banks get there way.

With respect, it is you that is being greedy. Not the banks. ERCs exist to allow mortgage deals with special terms to be financed. The terms are agreed at the outset and you agreed to these. Now you want to get out of it. So, on that basis, the greedy one is you. You want to have your cake and eat it.

Without ERCs there would be no mortgage deals and that makes things worse for the consumer. Not better.

holly_hobby

Essentially Spring, the ERC would only be unlawful if it could be proven to be a Penalty Charge, as oppossed to, and as discussed earlier, actual payment in remedy for your (the mortgagors) breach of contractual terms (ie they request to exercise their option to exit the contract, whilst still within the agreed contractual term).

Indeed, having had a quick dig, I believe there have been a number of fairly recent failed ERC cases - where the court accepted the mortgagee's argument that the early redemption charge imposed, was one of remedy as oppossed to penalty - which would be the crux of your argument, which would be brought under "Unfair Terms in Consumer Contracts Regulations 1991".

I haven't yet had time to look through the BAILII register, but if I can, I'll try and dig a case out - but for the moment hope you accept my comments without this.

Hope this helps

H x

kidmugsy

spring 84, why don't you just grow up and take your medicine like a man? You agreed the terms.

Thrugelmir

spring84 wrote: »

and not let the greedy banks get there way.

Previous posters have clearly stated why banks charge ERC's.

Doesn't seem as if just the banks that are greedy.

kingstreet

By asking to leave and paying the penalty, you are compensating the market counterparty which provided the rate swap on which your mortgage product was based.

If rates had gone up to 15%, they would have had to stand the loss. As rates have fallen and you want to get out, you need to compensate them for the loss they will suffer.

For you to have a fix for a set period of time, someone else has to be willing to put up the money in return for that fixed payment. Mortgage lenders often buy such swaps in the money market, rather than stand the risk themselves.

Here's a bit of background on how swaps work;-

http://www.swap-rates.com/InterestRateSwap.html

_Andy_

spring84 wrote: »

Hi

Now that mortgage rates are so low im tempted to change my loan. However I'm with nationwide and they have a 5% erc on the balance. Gutted. I found an article suggesting that these charges are excessive and therefore can be contested. search " fool and redemption charge illegal "and you'll find the article. yes the article is a bit outdated but the reasoning behind it is solid. I've also read an old thread on here that someone successfully challenged it and won but not much more info. Please if anyone has ever successfully challenged the charge or claimed it back I would love to hear about it? I know its a shot in the dark but i hope someone on here can help. It's sickening how banks can charge these ridiculous fees. My fault for signing with them but they are no different to loan sharks. The govt bails them out when they created this whole mess yet they won't do the same for the tay payer when they need help. Rant over for now.Tia

Sadly there are more and more of these ludicrous posts by the day.

dwsjarcmcd

spring84 wrote: »

Hi

Now that mortgage rates are so low im tempted to change my loan. However I'm with nationwide and they have a 5% erc on the balance.

My fault for signing with them but they are no different to loan sharks. The govt bails them out when they created this whole mess yet they won't do the same for the tay payer when they need help. Rant over for now.Tia

Your right about one thing, it is your fault! When exactly did the Nationwide get bailed out by the government (actually it was taxpayers!)

Thrugelmir

dwsjarcmcd wrote: »

Your right about one thing, it is your fault! When exactly did the Nationwide get bailed out by the government (actually it was taxpayers!)

The NW has received no Government assistance. In fact its taken over less secure Building Societies to keep them afloat.

dwsjarcmcd

Thrugelmir wrote: »

The NW has received no Government assistance. In fact its taken over less secure Building Societies to keep them afloat.

Sorry I knew that, it was aimed at the OP's comment!